A recent Jason Zweig piece, “New Warnings from an Investment Pioneer,” profiles Dean LeBaron, the legendary head of Batterymarch. “As unorthodox as ever,” LeBaron is leaning against the prevailing sentiments of the day and sounding the alarm. Whether you think he’s spot on, early, or just plain wrong, the article is worth reading.
By chance, a day or two before Zweig’s posting, I had come across a “Xeroxed” copy of a short article that LeBaron had written for the July 3, 1989 issue of Fortune, in which he talked about what institutional investors could do to improve performance.
The bullet points:
"Investments must have the potential for embarrassment." Many decisions favor avoiding embarrassment instead of taking a balanced look at risk and reward.
"Illiquidity is an opportunity for greater return." Boy, did this presage the move by institutions into "the endowment model."
"Investment horizons shouldn’t be the same as everybody else’s." The same point is made in Zweig’s article. Note, however, that the three-to-five year time horizon for institutions in 1989 has now collapsed to one-to-three years "at most." Yup.
"Dissent is good." It can’t be said enough. (In fact, I said it yesterday as part of a speech I gave on investment committees.)
LeBaron liked to “be first” and avoided following the herd like most investors do. It is hard to do, but the payoffs can be great, as LeBaron demonstrated time and again.